April is typically a pretty eventful month for the cannabis industry, with 4/20 celebrations bringing abundant attention – and sales.
But things have been heating up much earlier this year. In the first four days of April, the US House of Representatives (once again and narrowly) passed a bill to decriminalize marijuana and then, days later, (overwhelmingly) approved legislation to ease barriers to cannabis research. In addition, Maryland lawmakers voted to put an adult-use cannabis measure on their state’s November ballot; New Mexico became the latest state to begin recreational sales; and this Thursday, New Jersey will start selling recreational cannabis.
The full-scale legalization of cannabis in America feels like it’s closer than ever: More states have passed recreational-use laws; comprehensive legislation is gaining attention – and votes – in Congress; and the industry continues to steamroll to maturity with a stream of mega-mergers, high value investments and steady sales.
“The fact that the House of Representatives has passed [the Marijuana Opportunity Reinvestment and Expungement Act] in two successive sessions of Congress really is a sign that the end of federal prohibition is drawing near,” said Steven Hawkins, president and chief executive officer of the US Cannabis Council, a trade and lobbying organization.
However, while this is an industry that has long held a “not if, but when” belief toward legalization, what’s viewed as inevitable is not necessarily imminent. The MORE Act, which mustered only three Republican votes, is not expected to succeed in the Senate. Additionally, a separate legalization bill that Senate Majority Leader Chuck Schumer is expected to introduce this summer also might not garner the 60 votes needed to pass.
“In terms of passage of either [bill], it’s still a tough path ahead in the Senate,” Hawkins said. “But we’re not ruling anything out.”
A $27 billion industry
The absence of federal legalization has not slowed down one of the fastest-growing industries in the United States.
The cannabis industry reeled in an estimated $27 billion in sales in 2021, up 35% from 2020, according to data released earlier this month by MJBiz, a cannabis trade publication and events organizer. And in the next five years, it projects sales will nearly double.
“Right now, over 425,000 jobs in the economy are tied to the cannabis industry. With that, we see the continued increase for public support for legalization,” Hawkins said. “And we continue to see both red and blue states pass laws to legalize cannabis for either adult or medical use.”
As more states allow for cannabis sales, companies within the budding industry aren’t waiting for federal law changes to stake their claim.
In the past year, there have been a couple of multibillion-dollar mergers. The latest: Cresco’s $2.1 billion acquisition of Columbia Care (CCHWF). If the deal closes as expected in the fourth quarter, the combined company would have upward of 120 retail locations and dozens of facilities in 17 states and Washington, D.C.
“It sets us up very well if federal change happens any time soon,” Cresco CEO Charlie Batchell told CNN Business in an interview.
Other paths to legal reform
More than two-thirds of US states have legalized cannabis in some capacity: Of the 37 that have medical marijuana laws, 18 of them have recreational cannabis laws, according to the National Conference of State Legislatures. And more could be on the way. States such as Delaware, New Hampshire and Rhode Island are debating recreational cannabis legalization. Petition drives and legislative efforts for medical marijuana programs are also underway in states such as Kansas, Nebraska, North Carolina and South Carolina, said Karen O’Keefe, director of state policies for the Marijuana Policy Project, a lobbying and advocacy organization.
One huge step toward broader reform is the Secure and Fair Enforcement (SAFE) Banking Act, which would make it easier for cannabis businesses to access banking services. Because marijuana remains illegal in the eyes of the federal government, and despite 2014 guidance from the Financial Crimes Enforcement Network, some financial institutions have been wary of serving cannabis-related businesses for fear of violating anti-money laundering laws.
The SAFE Act bill is gaining momentum in Congress and is now in a good position to become law, Hawkins said.
Beyond making it easier for financial institutions to work with cannabis businesses, the SAFE Banking Act has long been touted as a public safety measure. Colorado Rep. Ed Perlmutter first introduced the legislation five years ago following deadly robberies at cash-only dispensaries.
Re-upping those safety concerns after another recent stretch of criminal activity at dispensaries, Perlmutter asked Treasury Secretary Janet Yellen to “put the muscle of the administration behind getting it passed.” Yellen responded that she was in support of the bill, in an exchange first reported by Marijuana Moment.
Other reforms, and even full-on legalization could come via other means, however, including the Farm Bill, said Rep. David Scott, chairman of the House Agriculture Committee, in a tweet last month. Scott pushed for the Farm Bill to include a provision that would “eliminate barriers for small businesses and Black entrepreneurs to start legal cannabis companies under state law.”
But all these piecemeal approaches to legalization could end up backfiring, said South Carolina Republican Representative Nancy Mace.
Mace last year introduced the States Reform Act, a bill that seeks to decriminalize cannabis, have it federally regulated like alcohol, impose a 3% excise tax, let states determine their own approaches and programs toward cannabis, and open up the doors to banking.
“It’s bad enough you get a multibillion-dollar industry operating in cash. That’s dangerous,” she said.
Bills that approach a singular issue like banking or research risk not passing muster in court, she said.
“That’s my fear. One, we do it right, constitutionally,” she said. “And, two, if we do a small piece of it, we’re not going to touch it for 20 years.”
An equitable industry
Policymakers and industry members also should not lose sight of how individuals, especially people of color, continue to be criminalized for activities that are now legal at the state level, said Amber Littlejohn, CEO of the Minority Cannabis Business Association.
“First and foremost, we need to get people out of prison, and we need to stop arresting people for doing things that folks are making lots of money doing,” she said.
People of color also face tremendous barriers operating within the industry. Attempts have been made to create paths into the industry for those with non-violent marijuana convictions whose communities were negatively impacted from the War on Drugs. But these efforts have largely been unsuccessful due to of state policies that limit licenses, fail to offer financial and business resources to people of color and that benefit deeper-pocketed multistate operators, Littlejohn said.
“I think one of the biggest problems is there seems to be an incredible disconnect between what people say they support and believe in and what [becomes law],” she said. “It’s up to us, the collective us, to be holding folks accountable.”
Cannabis in the Land of Enchantment
In New Mexico, the cannabis industry could generate more than $300 million annually in sales and $50 million in tax revenue over the next 12 months, as well as create 11,000 new jobs within the state in the next five years, according to Gov. Michelle Lujan Grisham’s office.
Between April 1-3, the first weekend of legal adult-use sales in New Mexico, cannabis retailers sold more than $5.2 million worth of recreational and medical products, Grisham said.
Parin Kumar, CEO and co-owner of the newly opened Vana Society cannabis store in Clovis, on the state’s eastern border, said she has been seeing a steady stream of customers.
For small towns like Clovis that have been looking to diversify their economy, the burgeoning industry is a boon, expected to bring new jobs and tax revenue.
“Especially in communities like Clovis, the buildings, the infrastructure, the school need help, this definitely can do a lot for the community economically, ” Kumar said. “It feels like we’re giving back.”